Fiscal Federalism Facing Challenges
The concept of fiscal federalism is under threat as the VB-G RAM G Act introduces a new fund-sharing pattern between the Central Government and State Governments. This act specifies a 90:10 fund-sharing ratio for Northeastern States, Himalayan States, and specific Union territories, and a 60:40 ratio for all other states and Union territories. Previously, the Central Government bore 100% of labor wages and 75% of material costs, effectively resulting in a 90:10 cost share between the Centre and the States. However, the implementation of the new 60:40 clause places a significant financial burden on states, particularly impacting poorer states and those with high migrant populations. This shift is likely to exacerbate rural distress, increase the Centre’s control over fund disbursements, and reduce its own liabilities.
Transition from Demand-Driven Rights to Supply-Driven Mandates
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) previously operated on a demand-driven approach, where workers were entitled to an unemployment allowance if work was not provided within 15 days of demand. In contrast, the VB-G RAM G Act mandates the generation of employment through pre-approved “Viksit Gram Panchayat Plans” integrated into various infrastructure frameworks at different administrative levels.
This structural shift is further constrained by the new funding mechanism outlined in the VB-G RAM G Act. The Act empowers the Central Government to determine the normative allocation for each state based on objective parameters, without specifying core standards or criteria for this allocation process. Additionally, any state exceeding its normative allocation will bear the excess expenditure as prescribed by the Central Government. This provision gives the Union Government the authority to arbitrarily decide fund allocations to states, impacting the number of employment days and job cards issued.
The transformation of a legal entitlement into a budget-capped mission directly impacts the Right to Livelihood, which is considered an integral aspect of the Right to Life under Article 21 of the Constitution.
